Both major political parties find themselves highlighting value in the
American Middle Class. Most middle class investors are not able to
get rich quick in the stock market and most companies are looking to
establish themselves and run their business with going concern. It is
thus important to both the average investor and public companies to
have relative trust that investing in the market is differentiated from
gambling at a casino. The lack of accountability leading up to the
crises's in the early 2000's led to the creation of the Sarbanes-Oxly
act and since then it has significant impact on the business world.
For small businesses, going public in search of financing can mean
that they can only stay so small. For many small businesses the cost
of compliance with SOX prevents them from going public. On top of
creating an IPO or even having accountants hired to produce the
necessary quarterly/yearly financial statements, the cost of auditing
is higher due to them having to pass the Public accounting oversight
board inspection. Some might argue that this is a bad thing but these
small companies still have options in raising capital through venture
capitalists/ private equity and bank loans. Maybe more research can
be done to help entrance to the public markets become more
efficient, but until then the middle class in America needs to be
guaranteed a level of trust in the capital markets they invest in.
The accountability changes SOX provides are that management
certifies financial statements, companies are audited by outside
independent auditors a and those auditors rotate every 5 years. Both
the auditors and company leadership must maintain a wall of
separation and each are held accountable for the integrity of their
work. This serves to not only hold wrong does accountable, but also
prevent wrong doing in the future. It was recently reported that
public accounting firms are separating their business from auditing
and consulting arms into two separate entities due to regulations
preventing the two from unduly influencing companies.
My professional goal is to own real estate and run my own german
shepherd breeding LLC. While I will never go public with either of
these, much of may life's savings are tied into the public stock market.
If I am misled by falsified financial statements and there is no PCAOB
board holding these companies accountable then I will have nowhere
to turn. If I pick up work for accounting firms then I will need to be
competent in upholding accounting standards spelled out in SOX and
GAAP in order to apply them to my auditing.
Cohn, M. (2017, July 24). As Sarbanes-Oxley nears 15-year
anniversary, ethics fall short. Accounting Today.
https://www.accountingtoday.com/news/as-sarbanes-oxley-nears-
15-year-anniversary-ethics-fall-short
